India GDP 2019-20: Good news! Political stability, repo rate cut to push growth up to 7.5% in H2, says RBI

In the latest Monetary Policy released Thursday, Reserve Bank of India has revised the GDP estimate for GY 2019-20.

A guard stands next to the Reserve Bank of India (RBI) logo outside its headquarters in Mumbai on June 6, 2019. Image: Reuters

In the latest Monetary Policy released Thursday, Reserve Bank of India has revised the GDP estimate for GY 2019-20. The GDP has been revised downwards from 7.2 per cent (as announced in April MPC) to 7 per cent. In April MPC, the GDP estimate for the first half of 2019-20 was in the range of 6.8 to 7.1 per cent. However, RBI noted that because of factors like weak global demands due to trade wars, low private consumption, especially in rural areas etc., the GDP may grow by just 6.4-6.7 % in H1 of FY 2019-20.

However, the growth will accelerate in the second half, hints the RBI document, taking the overall growth tally to 7% for the financial year and up to 7.5% in the H2 of FY 2019-20. The central bank has attributed political stability, more financial flows in the commercial markets in the second half as the reasons for GDP growth in the second half.

Here's the official RBI statement on GDP for FY 2019-20:

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"In the April policy, GDP growth for 2019-20 was projected at 7.2 per cent – in the range of 6.8-7.1 per cent for H1 and 7.3-7.4 per cent for H2 – with risks evenly balanced. Data for Q4:2018-19 indicate that domestic investment activity has weakened and overall demand has been weighed down partly by slowing exports. Weak global demand due to escalation in trade wars may further impact India’s exports and investment activity. Further, private consumption, especially in rural areas, has weakened in recent months.

"However, on the positive side, political stability, high capacity utilisation, the uptick in business expectations in Q2, buoyant stock market conditions and higher financial flows to the commercial sector augur well for investment activity. Taking into consideration the above factors and the impact of recent policy rate cuts, GDP growth for 2019-20 is revised downwards from 7.2 per cent in the April policy to 7.0 per cent – in the range of 6.4-6.7 per cent for H1:2019-20 and 7.2-7.5 per cent for H2 – with risks evenly balanced."

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